When you buy a U.S. Treasury bond, your investment helps fund government programs and projects. It also provides you a low-risk return on your investment. You just have to decide whether to purchase long-term or short-term Treasury bonds.

Generally, the difference between long-term and short-term Treasury bonds is the length of time before you get paid back for your investment. Treasury bonds pay interest on a semiannual basis, and when the bond matures, the owner is repaid with the face value of the bond.

For short-term Treasury bonds, the maturity date is three years or less from the date of purchase. Medium-term bonds mature between three and 10 years, and long-term bonds mature in more than 10 years.

How to choose the right Treasury bonds

First, think about whether you need your money back at a certain time. If you’re investing funds that you’ll need within a few years, a short-term bond probably makes the most sense. However, if you won’t need the money for 10 to 30 years, a long-term Treasury bond is an option.

Because Treasury bonds offer a guaranteed return on investment, investors can strategically time their maturity dates with future financial needs such as a child’s college education or a home purchase.

“If you have a known expense at a given date in the future, you can purchase a bond that matures near the date of your expense and have some certainty around funding the liability,” says John Dodd, CFA, chief investment officer at Catalyst Private Wealth in San Francisco.

Is timing the only difference between short-term and long-term?

The short answer is no. Maturity dates are the main difference, but the varying timelines translate into other differences between short-term and long-term bonds. For instance, short-term and long-term bonds expose investors to different types of risk.

Long-term Treasury bonds have more price risk, or sensitivity to interest rates, says Yung-Yu Ma, Ph.D., chief investment strategist at BMO Wealth Management. Because the money invested in the bond is tied up for a longer period of time, there’s a greater chance that interest rates will change significantly sometime during the bond term. “Long-term bonds can be very sensitive to changes in interest rates with prices rising or falling substantially,” Ma says.

While short-term bonds carry less price risk, they are more subject to reinvestment risk. “Short-term bonds mature relatively quickly, and upon maturity investors face risk associated with reinvesting those maturing proceeds at the new prevailing market rates,” explains Ma.

If interest rates are rising at the time, that reinvestment will turn out favorably. But if interest rates are falling, investors have a less favorable environment for reinvestment. With longer-term bonds, the market price may change with interest rate fluctuations, but investors who are holding their bonds to maturity have “locked in a known yield for a longer period, so reinvestment risk is pushed out far into the future,” adds Ma.

What payoff can I expect from long-term and short-term Treasury bonds?

Your return on investment is another difference to consider between short-term and long-term Treasury bonds. Extremely short-term Treasury bonds, which mature in one year or less, are also known as Treasury bills or T-bills. They do not pay any interest during the life of the bond. Instead, they are sold at a discount of their face value. Upon maturity, the owner can cash in the bond for its full face value. So when you purchase a Treasury bill at a discount, you know exactly how much you’ll earn when it matures—the difference between the face value and the discounted rate you paid for the bill.

Other Treasury bonds pay interest in an amount that is half their “coupon rate” on a semiannual basis. For instance, say you have a $10,000, 10-year Treasury note with a coupon rate of 2 percent. Every six months, you’ll receive a payment of $100 from the government. When your note matures, you can redeem it for $10,000.

In some interest rate environments, these bonds will sell for more than their face value, while at other times, they may sell for less than face value. The payout you can expect to receive depends on the interest rate, the time to maturity, and the amount you paid for the bond originally.

How to choose between long-term and short-term Treasury bonds

The right choice for you depends on your risk tolerance, objectives and time frame. It’s also wise to consider the current interest rate environment. “Short-term bonds tend to perform better in a rising interest rate market,” says Bryan Bibbo with The JL Smith Group in Avon, Ohio. “The inverse also being true, long-term bonds tend to perform better in declining interest rate environments.”

For many people, both long-term and short-term bonds can be an important part of building a complete investment portfolio. “Fixed income in general can help provide ballast within a portfolio and provide some protection against equity drawdowns,” Dodd says. “It can be a very powerful diversifying asset within a portfolio.”

Whether long-term or short-term, U.S. Treasury bonds are among the safest investments you can make. Because the bonds are backed by the full strength of the U.S. government, there is little risk of losing the principal value of your investment.

Investing involves risk including loss of principal. This article contains the current opinions of the author, but not necessarily those of Acorns. Such opinions are subject to change without notice. This article has been distributed for educational purposes only and should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but not guaranteed.